Rock and Roll.

Cola Wars.

I can't take it any more.

– Billy Joel

 

J: Welcome to the Cola Wars… on today’s, Straight Shot marketing podcast. Welcome, everyone!

Today, we continue in our series on the Lessons From CocaCola. And today! --- Cola Wars.

Let’s catch up with our story- Coke has been coasting along with its success: One Product, One Size (6.5oz), One Bottle, One Price (5 cents)

• Then in 1955, the upped the size (more on that later)

• In 1961, Sprite was made an additional flavor

• (named after sprite boy)

• And before that – after WWII – they added Fanta

 

Remember in Part 4, we discuss how they grew during WWII but now they find themselves at war. – once it was allies and axis. Now it’s Coke and Pepsi.

 

Z: Let’s give some backstory – because the Cola Wars could have been avoided.

 

J: Ok, Pepsi Cola was started as “brad’s drink” in 1898 by Caleb Bradham, a pharmacist in Newburn, NC

• Similar to Coke, it was marketed for medicinal qualities but it was always meant to be a drink, unlike Coke which was originally intended to be a medicine

• Pepsi was pepsin – which aided with digestion - and Cola Nut – So in 1902 it was renamed to “PEPSI COLA”

• The company actually went out of business because of the Sugar Shortages that happened during world war one and Bradham, went back to being the pharmacist in a drug store.

 

Shortly thereafter, Loft Candies – a retail chain, wanted special treatment from Coca-cola and asked for a discount to distribute Cocacola in their stores. Coke said no. And in retaliation, the owner bought Pepsi Cola out of bankruptcy.

But with only Loft Candies stores for distribution, they found themselves again on the verge of bankruptcy. At this point, Charles Guff offered to sell the business to Woodruff (at Coca-cola)… and again, he told him no.

 

Z: Right there! Missed opportunity. Coke could have bought up their competition, shut them down, and avoided the war.

 

J: Yes, because after that no – Guff doubled down. He bought used beer bottles that were twice a big as coke (12oz) and began selling twice as much product at the same cost. And Pepsi turned a profit inside of 6 months.

 

Z: So you can see the campaign, we’ve layed some photos of the displays for the campaign over a couple of the radio spots they used. Enjoy.

 

Do you feel the time period… that music, the cartoon cops…. Well, then WWII happened… and the sugar rationing almost put Pepsi Cola out of business again.

 

J: At the time, Pepsi was known as the poor man’s drink. In the 50s, Pepsi was poured into Coke bottles when people were entertaining because Pepsi had a lower image.

 

Z: For this reason - Mr. Al Steele, an executive at Coke that left to go work at Pepsi said “we have to take Pepsi out of the kitchen and into the living room” He took over the marketing effort to try and make it more refined. They did it gradually... Here’s an early radio spot – stating that it was socially acceptable to drink Pepsi.

The ads were not great but he showed the drive to make a change

– if they were going to compete, they had to change… After the war, Pepsi jumped all in with the usage of TV advertising (a new media). Here’s a tv spot of the same campaign.

 

Remember Coke had locked up the veteran and families market with their military programs. Pepsi tried and tried but was failing in the marketplace using the same demographics. So by the 60s, Pepsi changed its focus and went after the younger generation. And there they stayed. Pepsi, the choice of a new generation. They were showing examples of the youth in their ads and saying if you are like these people, you are a Pepsi person – Pepsi, for those who think young. Coke was saying “things go better with Coca-cola”  But things weren’t better in America. And with Pepsi asking people to choose sides. they began taking ground. Understanding the Pepsi was claiming future customers, Coke struck back with the 1971 Hilltop commercial – aimed at the youth and diversity in all cultures around the world. In 1975, Pepsi launched a very aggressive marketing campaign called the Pepsi Challenge- a taste test made public… and as the youth got older, Pepsi began winning market share.  By 1984, the campaign was perfected and they were only 3% behind Coke.

 

J: At this point, the soda companies began going tit for tat with :

• Bottle top campaigns

• Tshirt giveaways

They had started calling each other out in their ads.

 

Z: Their brand positioning was different:

• Coca-cola was about sharing and community (global and local)

• Pepsi Cola was about youth, freedom, and choice

• Coca-cola was using athletic stars and championing hard work

• They released the Mean Joe Green commercial considered one of the best commercials ever. It invoked emotion, it had a story inside of a commercial, which was quite rare among soft drinks at the time.

 

J: Pepsi was using pop stars and the utopia of youth culture.

• Their ads featured Michael Jackson

• and Cindy Crawford

 

Z: Both were taking on these great values when it was really just sugar water.

 

J: But they took it even farther –

• They would spy on each other like the cold war – like when there were deals being made in new territories.

• There was industrial espionage, buying secrets and misleading each other.

• Exclusivity agreements across the world, in schools, and with government properties…

It was war!

 

We’re gonna take a break for our sponsor here, but as we go into that. In case you missed it.

Here is the wartime movie reel that we used as a promo for this episode…

 

Z: I’ll give you an example that I personally remember:

In the mid-1980s, a young, relatively unknown fashion designer named Tommy Hilfiger made the first-ever Coca-Cola clothes collection.  It was a line of licensed leisurewear – anchored by the trendsetting Coca-cola long-sleeve rugby shirts – and it was an immediate hit with millions of Americans. It kickstarted his career and went a long way for promoting Coca-cola.

So what did Pepsi do? They started to make a clothing line to compete with Coke.

 

J: Did you know that now, more than 30 years later, Hilfiger and Coke are reuniting to reissue these signature styles with a contemporary look – fusing fashion and pop culture once again?

The Tommy Jeans coca-cola capsule collection for men and women with reissued pieces from the 80s collection with modern-day silhouettes and a new logo that combines Tommy Jeans and Coca-cola markets.  In addition to a reimagined take on the classic rugby shirt and the colorful line of sweatshirts, t-shirts, shorts, and sports jackets.

 

Z: So back to the 80s, Woodruff had become aged and was now was only a figurehead. Roberto Goizueta took the reins. And he vowed to stay #1, no matter what. Nothing was sacred. Woodruff quietly died in 1985 (spring) at 95 years old.

 

Coke was indeed beginning to lose the war:

• Without their exclusive contracts in restaurants and vending operations, Coke would be losing to Pepsi; they were losing in grocery stores already

• Coke did their own test and the Taste test revealed people did really like Pepsi better • And Coke, under new management, flipped out.

 

That started a new project, Code name “Project Kansas.” It was only known by top executives. And their mission was to develop a new formula to better compete with Pepsi.

• They based it on diet coke, a huge seller immediately when introduced (and not coke) – it was #3 behind Pepsi and coke

• More of their taste test indicated that people also preferred diet over regular Coke

• So they based new coke on taking out artificial sweetener from Diet Coke and adding high fructose corn syrup

• They ran numerous taste tests to ensure people liked the new formula over old

• Thought about sneaking it in the way kraft mac n cheese did but didn’t want to risk it

• It was leaked to the press, the day before the press conference was scheduled to announce it.

 

J: On April 23, 1985 – Fern Bellingrath, president of the Coca-cola Bottlers Association, signed approval of the change.

There was a dramatic unveiling with street events.

Max Headroom was the new ad campaign, that, like Pepsi, targeted the youth culture.

New coke even had a different, smoother bottle. Nothing was sacred.

Stocks went up, revenues were good. Local coke drinkers kept drinking. Those that didn’t like it just stopped altogether but didn’t seem to switch to Pepsi… and then…..

The vocal minority took hold and they announced this was an irrational reaction to Pepsi and began a stampede on the remaining stock of old coke. Roll out events became protests with lots of media coverage. Protest songs were written and recorded. Letters and essays were written to complain. The People banned together and filed a class-action lawsuit against the company

 

Z: Worse yet, Pepsi declared victory.

• Gave all of their employees the day off worldwide.

• Claimed it in their marketing.

• Had celebration parties near new coke roll out events.

• And on July 11, 1985, Coca-cola reintroduced Coca-Cola Classic.

• It was front-page news on most major newspapers.

 

New Coke was quietly retired a few years later.

• In 2010, Coke dropped the word “classic” from its packaging altogether.

• The brand was more important than the taste

 

In all there testing, they left out a very important question

– would people care if we took away the original

– they didn’t ask that on purpose, of course, because it was secret.

 

J: What they asked was, “would you buy this new flavor if it were Coca-cola”

• the majority said yes

• but 10% said no AND got angry about the implication.

• This 10% were very passionate and vocal.

• They began to try to convince others in the focus group to switch their answer to no also.

• This is exactly what happened when it came to market.

• So they had a heads up.

Did they consider doing both?

 

Z: Yes, but they didn’t want to split the Coke fan base… because doing so would make Pepsi number1 and they didn’t want to give them that advantage, this is war.

They forgot how good they had been at branding. Coke was a part of America’s fabric.

• After the switchback, classic coke started to take over market share from both new coke and Pepsi – it doubled the rate of Pepsi sales

Some claim the taste tests were flawed because they were small amounts so people didn’t know it was too sweet as an entire drink.

- these same people said Pepsi was winning because of superior marketing rather than taste -but, two years later, the WSJ did another taste test and new coke won again; when told – they got mad at the testers

 

J: During the Cola Wars, both companies were doing well, and so they started buying up other companies to expand beyond beverages and making new flavors.

• In 1982, Coke owned Columbia Pictures.

• Pepsi bought taco bell, pizza hut, and KFC

(they’ve since sold all those)

 

So Zachary, what’s our Straight Shot for today?

 

THE STRAIGHT SHOT

Z: So much from today. Let me break down what I observed.

 

1. Hindsight is always 20/20 coke had the opportunity to buy the company that would be the #1 competition and missed out. They were likely emotional, egotistical, and headstrong. So my advice here – is always keep a clear head when making business decisions.

 

2. Probably the biggest take away is the story of Pepsi as the underdog. They tried tried and tried again and slowly began gaining ground of Coca-cola.

• First to market with the 12oz size

• Found differentiators to champion that were different from Coke’s – found a niche that was working and dug in

• Found that their consumer research was marketable and added it to their campaign

• They never gave up.

• do your due diligence to stay in the game, innovate, persevere

 

3. On the coke side:

• Always compete (didn’t take it lying down)

• But don’t get scared – stay level headed

• Ask the right questions

• Measure your brand, trust in your history

• Don’t be afraid to course correct (with as much dignity as possible)

 

4. On both sides:

• cola wars are now famous

• both came out winners

 

J: In the next episode, we’ll be closing out the Lessons From Coca-cola series with a walk through some of their most creative campaigns through the years.

 

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Until next time, bye.